Question re: credit scores

[chase_white_rabbits]

Hi,

I'm a little confused about this. I've been working on paying off my old debts for the past four years, and have paid off about $15,000. When I was18, I racked up a bunch of bills, cc's, etc. that I never paid - just young and stupid, no excuses.

Now, my credit is finally getting back on track, but my credit score is still really low (650-680 depending on the report) because of the damage I've already done.

Now, my mom wants to add me to the title of her house that is fully paid off. She lives in an area that is being heavily developed, and the developers are all over the property. She doesn't want me to have any problems with the property when she passes away. I'm wondering how co-owning a fully paid for property will affect future loans? Will it increase my credit score? Will it be easier to buy a car in a few years, when I want to?

Thanks for any input!

[Miss Phode]

Re: Question re: credit scores

If you are only going on the title, and not the mortgage, then it won't cause you a credit issue.

To increase your credit score, you need several months of positive payment history. Make sure you pay all of your bills on time. Do you have any credit cards at this time? You shouldn't bounce from one credit card company to the next. You should stick with the same credit card company, and always be sure to pay your bill on time. It's in your best interests to always pay more than the minimum required amount. It's better to have a small balance on your credit card than no balance at all. When I was 18, dad took me to Marshall Fields to open my first credit card so I would begin to have a positive credit history. I purchased something every month with my credit card, and always paid more than the minimum amount required, but at the same time, always kept a small balance on my card, around $100 that I carried month to month. Now, on the other hand, carrying a large balance will always affect your score negatively. If you have multiple lines of credit open, i.e. several credit cards. Get all of them paid off except for one, and close the accounts of the paid off cards.

[higgies]

Re: Question re: credit scores

That's weird. I just got my credit report and credit score this morning as I haven't checked it in a few years.

Miss Phode's right. The only thing you can really do at this point is maintain good standing with the cards you have now, pay them down, and lengthen your good credit history. I think however, that closing too many lines of credit is not a good idea. Close excess cards, but it's a good idea to have about 3-4 open lines of credit and maintain a low balance/credit limit ratio. Closing many accounts I believe does impact you negatively in some way. If you are going to buy a new car soon, you might have to deal with a higher interest loan, but paying it timely will help your overall credit and help future loans. Also, you might be able to transfer the higher rate loan to a lower rate loan at some point in the future.

If the house is fully paid, the only thing it will help you with is possible collateral against a loan. Now, you might be able to improve your situation by taking a home equity loan for purchasing your car (if that's allowed). The interest might be deductable. I'm no tax lawyer though...so you might wanna check that stuff out.

[chase_white_rabbits]

Re: Question re: credit scores

Hmm, that's what I thought. I don't have issues with my bills/card anymore, but it did take a few year to pay off that 15 grand. I now have 3 cards - 2 regular credit cards, that I pay off the full balance every month. I just got a new one, but it's a healthcare credit card because I'm having very expensive dental work done.

My mom wouldn't go for any loans on the home, and I wouldn't ask her to. Oh well, I guess I'll just have to wait now.

[higgies]

Re: Question re: credit scores

I hear ya. From college through my first couple years out of college I racked up about $23k in credit card debt. I paid it all off in 2 years paying over $1k/month. It felt VERY good to get out from under that. Fortunately, I always paid on time and paid more than the minimum of course so it didn't hurt me at all...just stunk paying that much towards CCs. Good job getting everything in order and good luck with the car situation, etc.

[PizzaManNoMore]

Re: Question re: credit scores

As others have said, being on the title will have no effect on your credit score. As for closing accounts, in the "old days" having several credit cards was a negative and lowered your score. Creditors believed that if you had a lot of available credit that you would go on some gigantic spending spree and then run away to Bolivia. Now the thinking is that if you have a lot of available credit and do not use it that you show restraint, and it actually increases your score. If you do decide to close some accounts, make sure they note that the account was closed at customer's request (and yes, that notation does make it to the credit report companies). Otherwise, when applying for a loan or credit down the road, it may cause wonder as to why the account was closed; something you might have to explain at that time.


Just two cents from an old credit manager...